Musings on affordability
Thursday, January 15th, 2009We often hear the “30% of income” statistic used to define housing affordability. This is clearly inadequate. No one statistic will recognize our wide variables in lifestyle and situation. A suitable housing cost can be very different, for example, if a person doesn’t have a car, has a big family, doesn’t have a family, eats for free at a restaurant job, spends half their income on medical bills, etc.
If your expenses are mostly housing and food, paying 30% for housing seems downright quaint, however admirable and however great for retirement savings.
If a single metric is useful, how about 50% for housing plus transportation? It’s not perfect, but it’s much closer to the truth for pretty much everyone.
Local governments can do great things to encourage affordability. Some are happening now, and some aren’t.
Housing construction is expensive, and some of it is our own fault. Buildable sites are expensive because not enough land is zoned higher than what’s already there. Seattle’s famous “process” adds significant cost and risk for every project. We’re tacking on massive new fees onto projects above the older zoned heights. We’re disincentivizing new construction even though new supply is our greatest weapon to avoid SF/NY prices.
More on that: I don’t mean the new supply is affordable, because construction is expensive. But new supply means less demand for the old supply. That allows the old supply to gradually become cheaper over the years. That’s why the middle-class housing of 1920 or 1970 is generally more affordable today. (And the opposite is why similar housing in San Francisco or Manhattan is still outrageously expensive.)
Major kudos to the City for reducing parking requirements. This is already paying off as developers are developing parking in line with demand, rather than the average nimby’s idea of demand. The savings are dramatic for every space not built, and some projects that didn’t pencil with 25 spaces now pencil with 20 (with garage geometries, even one added space will sometimes trigger new costs in the hundreds of thousands).
In the third-rail department, our own expectations are part of the problem. In the US we tend to think 2,000 square feet is necessary for a family, and 800 square feet is barely livable for an individual. Basically we think we’re entitled to what much of the world would consider out-of-reach luxury. Why can’t a couple with two kids live in a two-bedroom apartment on a quiet street a few blocks from a park, at least until their careers advance a little?
